Letter to the Editor

Comment on fedgazette article on underemployment and labor shortages.

To the Editor:
I was drawn to your July fedgazettearticle
on underemployment and labor shortages. We are researching these same
issues here, following lots of local statistical and anecdotal stories,
like the ones you chronicle in Montana, North Dakota and South Dakota.
Published official estimates showing county unemployment rates of around
1 percent, 2 percent or 3 percent have driven economic development and
workforce professionals to fund studies that document "underemployment"
in their communities. That is, while acknowledging the ostensible full
employment in their county, they make the case that there are still plenty
of workers available if one takes into account those working part time
wishing to work full time, or those working in occupations for which they
are overqualified.

While this is a valid research question and a partial explanation for
the fact that employers can find workers in counties with such low unemployment
rates, I believe there is another explanationlocal labor force estimates
often widely understate the amount of
unemployment in counties. I looked up the recently released census unemployment
data for some of the counties you mention and compared those to the estimates
published by the various state agencies in March of 2000the time
of the census. For some of the communities you cite, the census points
to labor slack, not labor shortage. In Brookings County, S.D., the census
reports an unemployment rate of 4.9 percent, well above the 1.2 percent
estimated at that time by the state labor department. Similarly, the census
reports that Ramsey County, N.D., had an unemployment rate of 7 percent,
not 4.9 percent as estimated by the state. That is, there were actually
plenty of unemployed persons available for work.

On the other hand, it was encouraging to find that the census estimates
for the other counties mentioned (Flathead County, Mont., McIntosh County
N.D., Bismarck, N.D., Beadle County S.D., Codington County S.D.) were
fairly close to those published earlier by the state labor departments.

I found here in Kentucky that the state agency-generated county labor
force estimates for March 2000 rarely aligned to those reported by the
census, with the census finding higher unemployment rates in 93 of the
state's 120 counties. In 19 counties, the state had underestimated county
unemployment rates by more than 3 percentage points, and in two counties
by over 7 percentage points. The decennial census is the only true household
survey-based estimate of labor force status of the population in local
areas. It appears that the previously published estimates by state labor
agencies (typically showing very low unemployment rates) induced some
economic development and political leaders to react by commissioning the
sort of local underemployment studies you discuss.

Thanks for writing up these cases. We can all learn from a statistical
autopsy of recent labor market conditions, and from the reports from people
on the ground who deal with workforce issues daily.

Paul Coomes
Professor of Economics
University of Louisville
Louisville, Ky.